Currency fluctuation, staff benefits, CSR expenditure dent PGCIL Q2 earnings

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New Delhi | Published: November 7, 2018 12:32:16 AM

PGCIL recorded a 6% y-o-y rise in net profit to Rs 2,303.8 crore as it recognised Rs 404.9 crore income under ‘regulatory deferral account balances’.

Currency fluctuation, staff benefits, CSR expenditure dent PGCIL Q2 earnings

Higher-than-expected expenses related to currency fluctuations and lower than expected income from certain power lines dented the Q2FY19 earnings of state-owned transmission utility Power Grid Corporation of India (PGCIL).

K Sreekant, director finance, PGCIL, said in the conference call for analysts and investors that expenditure has also increased as the company has changed the way it expenses corporate social responsibility (CSR).

The transmission behemoth’s profit after tax and other expenses fell 7.5% to `1,904.6 crore. However, PGCIL recorded a 6% y-o-y rise in net profit to Rs 2,303.8 crore as it recognised `404.9 crore income under ‘regulatory deferral account balances’. The company’s income under this bracket was `81.1 crore in the corresponding quarter in FY18.

There has also been a 37.8% year-on-year (y-o-y) rise in employee benefits expenses, mirroring a low-base effect and wage hike provisioning of `44.7 crore. The company had recorded a gratuity-related one-time reversal of `95 crore under this account in the corresponding quarter of previous fiscal.

Foreign exchange losses of `350 crore have been booked in ‘other expenses’, Sreekant said. In Q2, PGCIL incurred capital expenditure of `5,870 crore and capitalised assets worth `4,740 crore, including foreign exchange rate variation of `3,360 crore.

There was a lower disincentive of `95 crore during the quarter ended September 30, as the Northern Regional Power Committee did not allow force majeure in one of the elements. There has also been CSR expenditure of `50 crore in the quarter, as the company is now spending on CSR uniformly, against the prevalent norm of expenditure being done in in the fourth quarter.

The company said that its profit figures would look much more attractive at the consolidated level because it books no profit from projects won through tariff based competitive bidding (TBCB) at standalone level.

A regulatory deferral account balance includes the income that is not recognised as an asset, but qualifies for deferral because it is expected that the regulator would recognise this income while calculating tariffs for the future. Its revenue in the quarter rose nearly 16% y-o-y to `8,689.9 crore, on the back of 15.4% increase in income from the transmission segment—the firm’s main business.

Income from PGCIL’s consultancy business increased 20% y-o-y to `138.6 crore while revenue from telecom business fell 7% to `161.9 crore. PGCIL currently has an asset pipeline worth `90,000 crore, which is seen to be executed over the next three years. Capital expenditure for H1FY19 was `12,300 crore (including TBCB of `2,500-3,000 crore). PGCIL expects to have capital expenditure of `16,000 crore in FY19.

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